Introduction To Corporate Social Responsibility Management Essay

Organizations always have an important Role in the lives of the society in which it is operating especially when the business is growing and thinking about globalization. Organization’s performance and production is linked with enviourment, social, cultural and governmental variables. When an organization operates its operations in a particular community, due to the business processes there are some responsibilities to the organization.

1.1 Definition of Corporate Social Responsibility

In general term CSR refers to:

‘The comprehensive approach which organization takes to meet the expectation of stakeholders by putting away such measures as revenues, profit and legal obligations. Community development, welfare, human rights and ethical conduct are key factors which come under the CSR umbrella’ (Laurie J. Mullins).

I would like to discuss the CSR issues in Aviation Industry that’s why I have chosen Air France-KLM and Ryanair.

1.2 Air France-KLM Overview:

Air France and KLM merged together in 2004 to form Air France-KLM Group while both airlines operate individually to retain their brands and identity (Air France-KLM CSR Report 2010). Air France was elected best airline of the year 2010 in Business Travel Awards (The Financial). Air France-KLM is the only airline which is selected in Dow Jones Sustainability Index in 2008.This group is the biggest in the whole world according to their profit growth which is €24.7 billion in 2008-2009 and €21.0 billion in 2009-2010.The passenger business, with €16.28 billion of revenues, makes the Group the global leader in both long and medium-haul passenger transportation and contributes some 80% of total revenues and second largest in terms of passenger carrier which is 71.4 million (Air France-KLM Financial Report 2010).Despite of its very difficult financial situation Air France-KLM showed a very dedicated attention to its CSR policy. Its approach towards CSR is underlined by signing of public commitment including the United Nations Global Compact and to work according to the UN human rights charter and EU Charter of Fundamental Rights (Air France-KLM Annual CSR Report 2010).

1.3 Ryanair Overview

Ryanair is one of the low fare airlines and operates more than 1400 flights per day from 44 bases. Ryanair have a fleet of 250 aircrafts and have ordered 64 more new aircrafts which will be supplied over the next two year. The company has an operating revenue of €2.9 million which is increased by 2% from year 2009.Rynair carry approximately 66.5 million passenger during 2009-2010.The company have a team of 7,032 employees serving the customers (Ryanair Website). Until now Ryanair don’t have any standalone CSR report. Ryanair has been ranked in the bottom ten companies in the ranking of Geneva-based Covalence based on environment performance, customer relations and information provided to customers (Irish Times).

Carroll’s CSR Model

In 1979, Carroll explained four elements or categories of CSR: economic, legal, ethical and philanthropic.

The first category which Carroll (1979) explain is about economics of an organization which explain that a company should have a sound and perfect economic policy which helps to provide the expected return to shareholders on their investment, fair salary and opportunities of jobs within the organization.

Legal responsibility is the expectation of the society to do business within the legal frame work defined by the society legal system. Ethical responsibility is the responsibility of the organization to act and react on any matter in ethical manners and do the things fair and good even it’s not described in the framework of the organization. Philanthropic stage is about to be a good corporate citizen and contributing the resources to community to improve quality of life (Archie B.Carroll).

In 1991 Carroll revised his CSR model and organized his CSR model in a pyramid figure.

Air France-KLM & Ryanair in Carroll’s Model:

Economic:

Air France-KLM has 14.8% growth in revenues to €12.37 billion and operating income of €444 million versus loss of €543 million at 30th September 2009, have group share of €1.03 billion after Amadeus income and complementary cargo fine provision. Air France-KLM has a significant improvement in the financial position in first half (Air France-KLM Financial Year 2010-2011).

Ryanair has announced a 17% increase in half year profit to €452 million. Revenues rose 23% to €2.2 billion as traffic grew by 10% to €40.1million passengers and average fare rose by 12% (Ryanair Half Year Results 2011).

Legal:

European Commission has fined Air France-KLM an amount of €340 million on 9 Nov 2010 for fixing the air cargo prices between 1999 and 2006(BBC, The Wall Street Journal).Air France-KLM who claim as the most sustainable airline group of the world was found in the price fixing.

Air France-KLM has started introducing the new seatbelt mounted airbags in their economy class cabins to reduce the fatalities in the case of crash (Bloomberg).

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Ryanair was fined £24,000 in 2003 because of breaching the Consumer Protection Act 1987 in six cases, a jury at Chelmsford Crown Court found them guilty. Ryanair couldn’t explain why they have misled the customer on their website prices (The Telegraph).

In 2008 Ryanair has to shut down its website after Office of Fair Trading deadline to remove all the miss leading prices from its website (The Times).

Ryanair don’t exercise the prescribed legal security checks by government even on the boarding lounge no body was found checking passports while passengers boarding on the plane (Video: “Ryanair Caught Napping”).

Ethical:

Combating with Climate Change

Air France-KLM has set up a ‘Climate Action Plan’, to ensure that throughout the both companies follow the plan to combat the climate change. They are also keeping informing the customers about their travel related CO² emission and opportunities to compensate them. Research department is also putting real efforts to find out the alternative renewable energy resources like Bio fuel (Annual CSR Report 2010).

In 2009, Air France-KLM starts working on the modernizing of its fleets to reduce the CO² emission. Air France rolled out ten new medium haul and six new long haul aircrafts, including two A380s.These aircrafts helps to reduce CO² emission by 15% as compared with Boeing 747-400. In 2008 Air France set a fuel plan according to that Air France will work hard to save 300,000 metric tons of CO² per year 2012 and 500,000 metric ton by 2020 (Annual CSR Report 2010).

While on the other hand KLM takes a different approach to cut down the CO² emissions and fuel cost. KLM generated 500 weight saving ideas to fuel consumption. In 2009 that helps to save 20,000 metric ton of fuel as compared to previous year (Annual CSR Report 2010).

Ryanair is investing €17 billion in buying the new fleets which consume less fuel. Ryanair is replacing older Boeing 737-200 with new 737-800 which is Next Generation fuel efficient aircraft. Ryanair is currently trying to minimize the fuel consumption to reduce the CO² emission. Ryanair is maximizing passengers per plane in order to minimize the CO² emission. (Ryanair Website).

Minimizing Impact on Environment

Air France is the one of the first airline who operates A380, which is famous for its reduced noise quality. Air France-KLM is processing 28,400 tons of waste per year and 20% of which recycled and 80% of them is converted into energy (Air France-KLM Annual CSR Report 2010).

Air France-KLM is putting more water meter to evaluate the consumption of the water. Greater use of Ecoshine process at Air France Industries (cleaning aircraft which use only little water).KLM is almost doubling the de-icing vehicles and succeeded in cutting down 35% of de-icing fluid (Air France-KLM Annual CSR Report 2010).

Ryanair also does not provide the drinks, food and newspapers to customer this is helping them to reduce the amount of wastage as compared to other airlines that produce large amount of waste (Ryanair Website).

Human Resource Policy

Due to 2008-2009 economic crises the Group has stopped hiring and cause of limited hiring was to secure the current employee. The newly established Cargo Navigation Office offer information on job vacancies, resume writing and training and development. Air France-KLM pursues a social policy based on discrimination, equal opportunities and respect for diversity (Annual CSR Report 2010).

Ryanair refuses to recognizes trade unions and airline is providing poor workplace facilities that’s includes the banned on staff to use the Ryanair electricity to charge their mobiles. Ryanair is forcing its staff to not be unionized as mentioned on the Ryan Be Fair Website. (www)

They also pay their cabin crew staff less pay. For each side trip they pay employees £14.Thats means after the complete tour its £28 pound. They also take more work from employees than the decided hours (Video: “Ryanair Caught Napping”).

Ryanair been charged for illegally employing the staff at Marseille Airport (The Connexion).

Ryanair have a high staff turnover and recently they have cut down the 1000 jobs including pilots and cabin crew at Frankfurt Hahn Airport (The Independent).

Customers

Air France-KLM has a commitment with its customers for the high quality service. By offering a wide range of solutions from small level to exclusive level customer always get tailored service regardless the culture, language and ethnic. More than 500,000 surveys carried out on the plane to get customer feedback and to tackle the problem and finding solutions for them. The Group also reaching the customers via marketing and communication tools to create the awareness of the sustainable development (Annual CSR Report 2010).

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In documentary “Ryanair Caught Napping” , it was found that they don’t clean plane and customers are welcomed to plane while rubbish bags sitting near to plane door. Ryanair have a rule that no plane can stay on ground more than 25 minutes because if plane is sitting on ground it’s not making money, that’s why they don’t provide enough time to cabin crew to clean the plane (Video: “Ryanair Caught Napping”).

Philanthropic:

In the difficult economic situation, Air France-KLM is determined to contribute to regional development by its ability to create work for all local actors, including the supply chain also making sure that they are investing in developing skills and education qualifications (Air France-KLM Annual CSR Report 2010).

Air France-KLM is supporting the local expertise of NGO partners in order to contribute to the United Nations Millennium Development Goals. Air France-KLM pursuing long term dialogue with the local stakeholders both airlines are deeply involved into the local community for their development and support (Air France-KLM Annual CSR Report 2010).

KLM and Kenya Airlines are working to launch a repair centre to train aircraft maintenance and repair workers in Kenya (Air France-KLM Annual CSR Report 2010).

In 1992, Air France created Air France Foundation who helps sick, disabled or in great disability both in France and other countries where Air France operates (Air France-KLM Annual CSR Report 2010).

KLM’s AirCare program helped seven different projects to combat the local problems and development matters (Air France-KLM Annual CSR Report 2010).

Ryanair have a Cabin Crew Charity Calendar programme in which company have raised €300,000 for the homeless and sick children and distributed this amount in different charities organizations (Ryanair Website).

Sethi’s CSR Model:

Early work on corporate social responsibility is done Sethi (1975) who form a three tier model of Corporate Social Performance which explain the corporate behavior. The three corporate social behaviors are based on:

Social Obligation

Social Responsibility

Social Responsiveness

Social obligation:

In 2009 Air France have spent €40 million for the soundproof houses of the local residents near by airport. Also Air France-KLM is fully following the laws and regulation defined by their governments (Annual CSR Report 2010).

Ryan air’s growth is being achieved in the most environment friendly and sustainable way by investing in buying new aircrafts and engine technologies. Ryanair is operating its flights not in nights and complying with the all noise restriction (Ryanair Website).

It was found during research that Ryanair was mostly found breaching laws and always been in court. As described earlier that misleading the customers in prices, poor safety checks and less interest in Government policies always relates to Ryanair.

Social responsibility:

Air France-KLM is modernizing its fleets for the low oil consumption and to reduce the CO² emission, also contributing to encourage the aviation departments and the entire supply chain to cut down the CO² emissions (Annual CSR Report 2010).

Air France-KLM is trying with the help of other airlines and aviation authorities to encourage the development of sustainable aviation fuel market (Annual CSR Report 2010).

From 2006-2008 Air France set itself to reduce the injuries and industrial accidents up to 30%. While KLM introduce the ‘Safety Champions’ with senior managers with a mission of safe workplace and finding out the new and undetected safety issues (Annual CSR Report 2010).

Air France-KLM pursues a long lasting relationship with its suppliers, customers and partners, as a part of their corporate social responsibility. By providing reliable and safe transportation to customer and offering transparent information (Annual CSR Report 2010).

Normally companies pay the training agencies for the staff training but Ryanair staffs who want to join them have to pay £1400 for the training and £25 for the uniform for one month (Video: “Ryanair Caught Napping”).

Once in Ryanair flight they ejected the nine blind passengers off the plane. They say that they are not allowed to take more than four passengers and in the case of emergency they don’t have enough facilities to take care of the customer (The Independent).

Airline is also planning to charge customers one pound for using the toilet for every visit also they are reducing the toilets on planes means one toilet for 189 passengers (Daily Mail).

Social responsiveness:

In 2006, the group set up a shared reporting system which is headed by two statutory auditors. To review and to be informed about CSR issues, Air France-KLM works closely with both internal and external groups of stakeholders to achieve the CSR objectives sets in CSR Charter of Air France-KLM (Annual CSR Report 2010).

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Ryanair don’t have a CSR department to look after the raising issues in aviation industry. Only little information they have provided on their website regarding their efforts towards environmental issues.

Recommendations:

After discussing the CSR issues in both airlines, I would like to make some recommendation to both companies.

Air France-KLM is trying to minimize the Co2 emission by buying the planes that have fuel consumptions efficiency and new biofuel technology. But they should renew their all aircrafts because if they invest to buy new aircrafts then it will consume less fuel and it will be more secure in the sense of aircraft life. Ryanair is just increasing its fleet by buying new planes. They should think about to invest in new biofuel planes.

As Air France-KLM is obeying the law of the states and making changes in its security procedures. Ryanair should think seriously about the safety of its passengers and should have efficient security checks.

Even if Air France-KLM’s revenue is going down still they should not participate in the price fixing. Air France should take some cost saving measures like not to start new routes but instead they should invest in their aircraft maintenance matters. Ryanair also should review its all legal matters and try to introduce a proper stakeholder management system.

All the research shows that a major reengineering required in Ryanair. They should invest in their corporate enviourment not to buy new planes and increasing routes. Also they were found taking more work from employees and paying them the salary which is less than national rate. These all matters Ryanair should consider and try to make a better corporate image in the aviation industry.

Learning Reflections

Throughout my Corporate Social Responsibility course I have progressed in learning by developing my interpersonal skills and how to work in groups. Some of the areas where I want to develop my knowledge and expertise were my communication skills and how to evaluate a company’s policies. In my whole academic years I never experienced such a learning process in which whole course is on discussion base. During my course learning I have worked on different tasks like industry research and doing presentations for this research. By doing this presentation I got more confidence and experience how to develop interpersonal skills. I have done this in a group and we done the research together for this task. We did this research by using the different sources like we used newspapers, journals and books, for more material we went to British Library where we read different articles and text regarding the CSR issues. During the course we watched the documentary “One Night in Bhopal”. After watching this documentary I learned that how big companies put the society and people in trouble for little profit and don’t take the precaution measures. During the course our tutor provides us all the academic and practical material which helped us to understand the CSR topics in depth. In out last class, we attend a workshop which was held in resource room where our tutor helped us a lot on how to do the research and how to make a professional report. He taught us how to write Harvard References in our assignments as well.

Throughout of my course our learning cycle was according to the Kolb’s learning model, during this module we worked in groups and also in our Marketing Communication we had a presentation to do which was also in groups.

At the first part of our learning we started with abstract ideas. Every group member comes with own ideas and we done the brainstorming for that. Then we transferred to the next stage of learning which was the collecting all ideas and then analyze them. After analyzing we made some decisions and chosen the right information which we needed for our task. During this analyzing process I learned how to anticipate the situation and how to value to other group member.

After making our selection we putted everything into action and had an experience of what we have done. At this point we learned how we assemble all work and put all efforts together. Having experience our learning cycle move forward and reach the final stage of the Kolb’s learning cycle which is reflection and observation. In this section we conclude everything whatever we have done and make observation from a new perspective. Before making decision we put reflection on overall experience and look at whole task from different perspective.

Overall experience of this module was very great which encourage me to enhance my interpersonal skills and give me more confidence to face all the learning challenges.


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